Can Malcolm Turnbull do climate and energy policy now?

The re-elected Coalition government has the opportunity to revamp its policies on climate change. Transition of the energy sector is key if the 2030 emissions target is to be met. But with a razor-thin majority in Parliament, will Prime Minister Malcolm Turnbull have the appetite and internal authority to tackle the challenge?

In contrast to the past three federal elections, climate change policy was not one of the big issues in this campaign. Faced with a fairly comprehensive climate policy blueprint from the Labor Party, the Coalition opted not to say much on the subject. A carbon tax and emissions trading scheme have been ruled out, but the door for climate and energy policy reform has not been slammed shut.

In fact, there has been a clear sense that the government accepts that there needs to be a more comprehensive policy framework than just the subsidy-based Emissions Reductions Fund, with its inherent problems. In 2015, Environment Minister Greg Hunt announced that there will be a climate change policy review during 2017.

But the internal politics of the Liberal Party could yet stand in the way. Turnbull has traditionally supported measures to cut emissions, and this fits with his emphasis on innovation. But many on the right of the party oppose action on climate change.

The fact that the Coalition only just scraped into government might be seen as an argument in favour of more moderate policies. But it could also strengthen the hand of Turnbull’s detractors, including opponents of climate change action.

Is that a price on your carbon?

One tricky issue for the Coalition in the election was the plan for the Emissions Reductions Fund “with safeguards”. In the expert community it is generally thought that the Coalition’s plan has been to transform the current mechanism into a so-called “baseline and credit” scheme or a variant thereof.

Baseline and credit would put a price signal on carbon emissions in electricity and possibly industry. It has drawbacks compared with normal emissions trading, among them that there would be no revenue for the government from selling carbon permits; that it would not fully reflect carbon costs to electricity users; that some or many businesses may not be covered; and that it may perpetuate carbon-related investment uncertainty. Its main attraction is political – it would limit effects on electricity prices, and it has been depicted as something that is not a “carbon price”.

Energy transition

The energy challenge is of an altogether different magnitude. Climate policy needs to be integrated with energy policy, and it must get the transformation of Australia’s power sector under way. As the Deep Decarbonisation project showed, a near-zero-emissions electricity supply by 2050 is at the heart of a low-emissions strategy.

This is possible and affordable, but waiting for it to happen all by itself would take too long.

Unless there is a significant and durable price on carbon, other approaches are needed to get the most emissions-intensive power plants off the system – for example, through a market mechanism for brown coal exit and/or regulated closure of old plants.

Support for new zero-emissions energy is a big open question. Will the Renewable Energy Target be extended, perhaps as a low-emissions energy target? Will there be fixed-price auctions for large-scale renewable energy, such as those in the ACT? Should funding for clean energy research and development be ramped up, and how?

Then there are questions about energy market reform and structural adjustment. How to provide adequate revenue for a future power system that largely relies on renewables, when the existing electricity market was designed for fossil-fuel-powered generators? How to manage the social and economic adjustment in the coal regions?

The government will need to tackle energy transition, and it has the opportunity to make this one of its contributions to help modernise the economy. There might even be some common ground for it in parliament.

Ambition needed

Marginal policy change is not going to do the trick. Australia’s pledge under the Paris Agreement is a 26-28% reduction in emissions by 2030, relative to 2005. This is at the lower end of the range, according to many indicators, and it is likely that the target will need to be strengthened for the next round of international pledges.

Labor’s proposed target is a 45% reduction. This is on the way to much deeper required reductions down the track.

Achieving even a 28% target through domestic reductions would be a big step for Australia. Net national emissions have been roughly flatlining for more than two decades, thanks to falling emissions from land-use change.

Brexit, Trump and the future

Malcolm Turnbull

Amid the current global destabilisation, there are concerns that climate policy will take a back seat despite the momentum created by the Paris Agreement. In Europe, Brexit, terrorism and refugees are top of the agenda. But unless they herald a global shift towards inward-looking governments or wider economic malaise, Europe’s troubles should have little bearing on the transition to cleaner energy in Asia and Australia.

A Donald Trump presidency, on the other hand, could throw a spanner in the works by providing a rallying point for opponents of climate action. Hillary Clinton as president, however, would push for meaningful climate policy both globally and at home.

Those determined to push ahead will do so regardless of the to and fro in Europe and the United States. China, for example, seems unlikely to waver in its push to modernise its economy and thereby dampen carbon emissions.

Turnbull has a chance to help position Australia for a future in which the carbon-intensive way of doing things is on the way out. We will see whether he chooses to do so – and whether his party room will let him.